The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
Dave,
The forecast graph "Estimated Earnings and Return Calculator" will as you say illustrate fair value based on current estimates. However, the historical graphs are dynamic and will calculate historical valuation based on historical growth.
For example CSCO has a 21year (20 yrs hist and current year) of 24.5. Since this is above 15 % the fair value formula PE = Growth rate draws an orange line at a 24.5 PE. This shows historical fair value. However, a 15 year graph shows a growth rate of 12.7% which is less than 15%, and therefore the extrapolated PE=Growth Rate and Graham Dodd Formula is automatically applied (GDF-PEG) and applies a 15 fair value PE.
The important point is that this shows growth slowing over the years alerting the subscriber to that important fact. A 6yr graph will show an even lower growth rate and how the market price adjusts.
But as you said, we learn from the past, but we invest in the future, therefore buy ,sell or hold decisions are best made based on best estimates of future growth (present tense).
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
tallguyz,
Thanks for sharing your views. The reason I use 15 year graphs most of the time is because they are the longest where we type in all data. As you know, I have often stated and promoted that subscribers should always run multiple time frames because a great benefit of FAST Graphs is their dynamic nature.
However, when presented in an article, they are just a picture and their dynamic benefit is lost. I have tried to include live graphs in the past, but SA and other sites have declined.
Furthermore, the fair value calculation on any company is best made on the future potential growth rates etc. As I mentioned in this article, there is one year of forecast on all historical graphs. Additionally, I have grave concerns about putting too much weight on times frames near or around recessionary periods because numbers are often distorted during these times.
Finally, a great benefit of the FAST Graph research tool is the perspective they provide on the long term track record that the business has generated-earnings,div... including payout ratios etc. I agree that the "dead" FAST Graph is not ideal, but I further contend that they are far superior to spread sheets of numbers or simple stats like the 5year growth rate is X.
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
Mike,
Growth rates are definitely lower, but still at double digit levels. Consequently, I believe that big tech CSCO, MSFT, IBM etc. are very undervalued. I see no logical reason why they should not all be at a market multiple at least. Good dividends, growth and cash flow.
Also, the impact of the bubble 1995-2000 are not a factor in today's valuation. Current valuation is a function of current fundamentals, IMHO.
My Top 10 Fairly Valued Fast-Growing Stocks [View article]
grox01,
I generally agree with your comments, thanks for sharing your views. The premium version of FAST graphs does have a screening tool, and 16 pre-loaded lists and indices. The CCC lists, S&P 500, DOW etc.
My Top 10 Fairly Valued Fast-Growing Stocks [View article]
Qniform,
First of all FAST Graphs uses Standard and Poors Capital IQ as a data source, and we consider them one of, if not the most accurate data provider available. Second, I do not know how, why or where Dane Bowler got his information, as he did not validate or provide a source. Just an unsubstantiated opinion bordering on slander.
Regarding SNL, I agree that they are a good source of very limited data. FAST Graphs provides data on many thousands more companies than they do.
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
Analytical Chemist,
Thanks for the questions. The complete answers are complex and require a working knowledge of FAST Graphs and its valuation formulas. The simple answer is based on price and its relationship to the orange earnings justified valuation lines. However, there are different formulas used to value a business based on EPS growth.
The predicted 5yr. return is a function of consensus EPS growth and each respective company's price moving to fair value (earnings justified value).
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
captainccs,
Thanks for sharing your view. However, I have done all the analysis you suggest and more. In fact, FAST Graphs makes that process simple. The 20 year or the 13 year analysis changes nothing. Perhaps you are not familiar with what the FAST Graphs are depicting. The history has little to do with the valuation currently.
Regarding the tech stocks that you are citing, nothing in this article said that they are in the same businesses that they were. In fact, I would argue that each of these companies are on top of the current situation in technology and have adapted their businesses accordingly. But frankly, that is the subject of an entirely different article with an entirely different perspective.
This article was about the current valuations of the 30 Dow Jones industrial average constituents. Based on current and expected earnings, I stand by my thesis. Nevertheless, once again, I appreciate your sharing your views. But I do not see any flaw in what I presented here, drawing 20 year or 13 year charts, which I’ve done changes nothing relative to what has been presented here.
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
Ruralist, Thanks. However, there are few schools of finance that teach how to value a business. Today it is all about MPT, which Buffett referred to as dementia and twaddle. ;0)
Will Caterpillar Bulldoze My Portfolio Higher? [View article]
Thanks for the mention. I enjoyed the article, well done.
Regards,
Chuck
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
The forecast graph "Estimated Earnings and Return Calculator" will as you say illustrate fair value based on current estimates.
However, the historical graphs are dynamic and will calculate historical valuation based on historical growth.
For example CSCO has a 21year (20 yrs hist and current year) of 24.5. Since this is above 15 % the fair value formula PE = Growth rate draws an orange line at a 24.5 PE. This shows historical fair value. However, a 15 year graph shows a growth rate of 12.7% which is less than 15%, and therefore the extrapolated PE=Growth Rate and Graham Dodd Formula is automatically applied (GDF-PEG) and applies a 15 fair value PE.
The important point is that this shows growth slowing over the years alerting the subscriber to that important fact. A 6yr graph will show an even lower growth rate and how the market price adjusts.
But as you said, we learn from the past, but we invest in the future, therefore buy ,sell or hold decisions are best made based on best estimates of future growth (present tense).
I hope that clarifies things,
Chuck
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
Thanks for sharing your views. The reason I use 15 year graphs most of the time is because they are the longest where we type in all data. As you know, I have often stated and promoted that subscribers should always run multiple time frames because a great benefit of FAST Graphs is their dynamic nature.
However, when presented in an article, they are just a picture and their dynamic benefit is lost. I have tried to include live graphs in the past, but SA and other sites have declined.
Furthermore, the fair value calculation on any company is best made on the future potential growth rates etc. As I mentioned in this article, there is one year of forecast on all historical graphs.
Additionally, I have grave concerns about putting too much weight on times frames near or around recessionary periods because numbers are often distorted during these times.
Finally, a great benefit of the FAST Graph research tool is the perspective they provide on the long term track record that the business has generated-earnings,div... including payout ratios etc. I agree that the "dead" FAST Graph is not ideal, but I further contend that they are far superior to spread sheets of numbers or simple stats like the 5year growth rate is X.
Regards,
Chuck
My Top 10 Fairly Valued Fast-Growing Stocks [View article]
I appreciate the correction.
Regards,
Chuck
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
Thanks.
Chuck
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
Thanks, glad you find my work helpful.
Regards,
Chuck
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
Thanks for the kind words and for reading my work.
Regards,
Chuck
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
Growth rates are definitely lower, but still at double digit levels. Consequently, I believe that big tech CSCO, MSFT, IBM etc. are very undervalued. I see no logical reason why they should not all be at a market multiple at least. Good dividends, growth and cash flow.
Also, the impact of the bubble 1995-2000 are not a factor in today's valuation. Current valuation is a function of current fundamentals, IMHO.
Thanks for the kind words,
Chuck
My Top 10 Fairly Valued Fast-Growing Stocks [View article]
I appreciate your bringing this to my attention, and I did not misinterpret the heads up.
rcpatrick5443,
Thanks for supporting FAST Graphs. My gripe is with Dane Bowler and not Qniform.
Chuck
My Top 10 Fairly Valued Fast-Growing Stocks [View article]
I generally agree with your comments, thanks for sharing your views. The premium version of FAST graphs does have a screening tool, and 16 pre-loaded lists and indices. The CCC lists, S&P 500, DOW etc.
Regards,
Chuck
My Top 10 Fairly Valued Fast-Growing Stocks [View article]
First of all FAST Graphs uses Standard and Poors Capital IQ as a data source, and we consider them one of, if not the most accurate data provider available. Second, I do not know how, why or where Dane Bowler got his information, as he did not validate or provide a source. Just an unsubstantiated opinion bordering on slander.
Regarding SNL, I agree that they are a good source of very limited data. FAST Graphs provides data on many thousands more companies than they do.
Chuck
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
Thanks. Exploiting other peoples folly is the foundational value of valuation.
Regards,
Chuck
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
Thanks for the questions. The complete answers are complex and require a working knowledge of FAST Graphs and its valuation formulas. The simple answer is based on price and its relationship to the orange earnings justified valuation lines. However, there are different formulas used to value a business based on EPS growth.
The predicted 5yr. return is a function of consensus EPS growth and each respective company's price moving to fair value (earnings justified value).
Chuck
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
Thanks for sharing your view. However, I have done all the analysis you suggest and more. In fact, FAST Graphs makes that process simple. The 20 year or the 13 year analysis changes nothing. Perhaps you are not familiar with what the FAST Graphs are depicting. The history has little to do with the valuation currently.
Regarding the tech stocks that you are citing, nothing in this article said that they are in the same businesses that they were. In fact, I would argue that each of these companies are on top of the current situation in technology and have adapted their businesses accordingly. But frankly, that is the subject of an entirely different article with an entirely different perspective.
This article was about the current valuations of the 30 Dow Jones industrial average constituents. Based on current and expected earnings, I stand by my thesis. Nevertheless, once again, I appreciate your sharing your views. But I do not see any flaw in what I presented here, drawing 20 year or 13 year charts, which I’ve done changes nothing relative to what has been presented here.
Regards,
Chuck
The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued [View article]
Thanks. However, there are few schools of finance that teach how to value a business. Today it is all about MPT, which Buffett referred to as dementia and twaddle. ;0)
Chuck